[House Hearing, 109 Congress]
[From the U.S. Government Printing Office]

                      WORKING CONDITIONS IN CHINA:
                          JUST AND FAVORABLE?



                               before the


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION


                            NOVEMBER 3, 2005


 Printed for the use of the Congressional-Executive Commission on China

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Senate                               House

CHUCK HAGEL, Nebraska, Chairman      JAMES A. LEACH, Iowa, Co-Chairman
SAM BROWNBACK, Kansas                DAVID DREIER, California
GORDON SMITH, Oregon                 FRANK R. WOLF, Virginia
JIM DeMINT, South Carolina           JOSEPH R. PITTS, Pennsylvania
MEL MARTINEZ, Florida                ROBERT B. ADERHOLT, Alabama
MAX BAUCUS, Montana                  SANDER LEVIN, Michigan
CARL LEVIN, Michigan                 MARCY KAPTUR, Ohio
BYRON DORGAN, North Dakota           MICHAEL M. HONDA, California


                   STEVEN J. LAW, Department of Labor
                 PAULA DOBRIANSKY, Department of State

                David Dorman, Staff Director (Chairman)

               John Foarde, Staff Director (Co-Chairman)


                            C O N T E N T S



Gearhart, Judy, Program Director, Social Accountability 
  International, New York, NY....................................     2
Viederman, Dan, Executive Director, Verite, Amherst, MA..........     6
Rosenbaum, Ruth, Executive Director, Center for Reflection, 
  Education, and Action, Inc., Hartford, CT......................    11

                      WORKING CONDITIONS IN CHINA:
                          JUST AND FAVORABLE?


                       THURSDAY, NOVEMBER 3, 2005

                                       Commission on China,
                                                    Washington, DC.
    The roundtable was convened, pursuant to notice, at 2:35 
p.m., in room 480, Ford House Office Building, David Dorman 
(Senate Staff Director) presiding.
    Also present: John Foarde, House Staff Director; Chris 
Mitchell, Legislative Director, office of Representative 
Michael Honda; Adam Bobrow, Counsel, Commercial Rule of Law; 
Katherine Palmer Kaup, Special Advisor on Minority 
Nationalities Affairs; and Patricia Dyson, Senior Counsel for 
Labor Affairs.
    Mr. Dorman. We are very pleased to have a distinguished 
panel here with us to talk about working conditions in China. 
But before we get started, I would like to tell everyone that 
this is our first roundtable since the Commission's 2005 Annual 
Report came out. If you have not seen the Annual Report yet, 
you will find copies of it outside the front door. So please 
feel free to take a copy. If they are all gone, please stop 
down at the Commission's staff offices on the second floor of 
this building and we can give you one there.
    I want to apologize to everyone in the audience. This is 
the first time we have used this room. As you probably noticed, 
the room does not have microphones. So I am going to ask 
everybody in the audience to raise their hand if you cannot 
hear a speaker during the course of the roundtable. I will take 
that as a notice to tell the person talking to speak up just a 
little bit.
    We will all try to keep our voices at the right level, but 
it is easy to forget over 90 minutes. So, please feel free to 
raise your hand if you cannot hear.
    Mr. Foarde. It might also be useful if you would move 
forward. There are plenty of seats up here in the front, so 
move yourselves forward. Do not be shy.
    Mr. Dorman. As in previous roundtables, I will introduce 
each of our panelists individually, and then give each panelist 
five minutes to make a statement. After all our panelists have 
spoken, each individual on the dais will have an opportunity to 
ask a question and hear an answer from one, or all, of the 
panelists. We will continue asking questions and hearing 
answers until we have reached 4 o'clock, or until we run out of 
questions. Since I have been on the Commission staff we have 
never run out of questions, so I think we will probably use up 
all that time. So let's get started.
    I would like to introduce our first panelist, Judy 
Gearhart. Judy is the Program Director for Social 
Accountability International [SAI]. Ms. Gearhart serves as the 
program director at SAI and as an adjunct professor at Columbia 
University. She joined SAI in 1998. She has worked on 
democratization and women's labor issues in Mexico and 
conducted evaluations for UNICEF in Honduras. Ms. Gearhart is 
the author of a national child labor study in Honduras for the 
International Labor Organization [ILO]. She has participated in 
numerous public forums and published on topics including: NGO 
networks' influence on policymaking, child labor, and 
corporate social responsibility [CSR]. Ms. Gearhart holds a 
master's degree in international affairs from Columbia 
    Ms. Gearhart, thank you very much for joining us today. You 
have five minutes for an opening statement.
    Ms. Gearhart. Oh. Five minutes. I thought it was 10.
    Mr. Dorman. Ten minutes. I stand corrected.
    Ms. Gearhart. Thanks.


    Ms. Gearhart. I will run through briefly what Social 
Accountability International does and talk a little bit about 
how we are working in China.
    SAI published the SA8000 Standard for Safe and Decent 
Workplaces in 1997, after an 18-month consensus-based drafting 
process by our international advisory board, which includes 
international business, trade unions, and non-governmental 
    The SA8000 standard is based on ILO Conventions, the 
Universal Declaration of Human Rights [UDHR], and other human 
rights norms. It also defers to national law in the countries 
where it is applied, whichever norm is stronger.
    SA8000 is primarily a business-to-business standard, in 
line with International Organization for Standardization [ISO] 
principles of continuous improvement and management systems-
based implementation. SAI accredits independent organizations 
which audit workplace facilities for compliance with the 
standard. Once in full compliance, those facilities receive a 
certification which lasts three years and requires semi-annual 
surveillance audits. For us, certifications are an important 
communication mechanism and they do three things: signal a 
facility's social responsibility to brand customers; provide a 
level of transparency for consumers--factory names and 
locations are published on the SAI Web site and the facility is 
required to publicly report on compliance; and provide a handle 
for workers and their advocates, and all others, to claim their 
rights--there is an open complaints process--both internal to a 
certified facility and external through complaints filed with 
the accredited certification body and to SAI. Resolutions of 
complaints are posted to the SAI Web site.
    As of June 2005, there are 710 certifications worldwide, 
covering 436,600 workers, spanning 45 countries and 52 
industries. In China, there are 99 certifications concentrated 
in the apparel, footwear, housewares, and electronics sectors.
    In addition to these certifications, there are thousands of 
gap analysis audits conducted each year against SA8000, using 
SA8000 as a benchmark, and numerous certification applicant 
audits that do not result in certification. So, it is a well-
known benchmark.
    SA8000, it is important to note, is a voluntary standard. 
There are two main drivers behind these certifications and the 
benchmark audits. One is international brand pressure, 
international brands seeking to ensure their suppliers provide 
decent working conditions in compliance with SA8000 and to 
protect their reputation and the value of their brands. The 
other driver is the motivation of managers or owners of 
factories, farms, and service centers seeking, on their own, to 
provide decent working conditions in compliance with the 
standard and to gain a competitive edge in international 
markets and/or to protect their reputation and the value of 
their own local brands.
    The uptake of SA8000 in China is among the strongest. It is 
the country with the largest number of workers covered in 
facilities and the third largest number of certifications in 
any country.
    Nevertheless, much smaller countries, such as Italy, have 
more than twice as many certified facilities--Italy has 233, 
compared to China's 99--and a significantly higher proportion 
of the population is covered. China is unusual among the top 
countries for SA8000 certification, as the other leaders are 
Italy, Brazil, and India, countries where there is already a 
robust corporate social responsibility movement and debate. 
This is mainly what I want to talk about today.
    I think one of my first points here is that SA8000 is 
working to encourage a robust CSR dialogue within China and 
among forward-thinking business and opinion leaders. I think 
that is an important step. So what I can tell you about the CSR 
debate in China, from what we learned, is that the debate is 
rapidly growing and SA8000 is frequently referenced. A key word 
search in November 2005 yielded 118,000 references to SA8000, 
just to give you an example. The debate in China, from 2004 
through early 2005, tended to fall along two lines: those who 
see corporate social responsibility as a threat and those who 
see it as the right way to do business. These differing views 
can be found within business circles as well as among 
government institutions.
    Those who see CSR as a threat to Chinese business 
competitiveness are those who are focused on a low-cost 
strategy, in our view. They cite CSR as the imposition of 
foreign values on China, and it is regarded as a potential 
trade barrier. They also seem to confuse the requirement of the 
market with a government requirement. This is something 
important to clarify.
    There is a lot of misinformation about SA8000 in the 
Chinese press. In the case of SA8000, the press was reporting 
that the United States would require all imports from China to 
be certified to SA8000 as of May 2004. That is not the case. 
That is not anything we have put out, but it is one of the 
points that speaks to the confusion.
    In contrast, CSR in general--or SA8000 specifically--is 
also seen by others in China as an attractive opportunity to 
improve Chinese business competitiveness. That view is for 
those looking to advance Chinese production toward higher 
value-added goods, and who seek an advanced industrial relation 
system in China, with ``best practice'' human resource 
management, better-quality productivity, and retention of 
workers. A couple of local governments currently provide 
subsidies for local firms that seek to implement SA8000 within 
China. This is an interesting indicator of some actors in China 
being receptive to SA8000.
    At the moment, in the later months of 2005, the pro-CSR 
voices seem to be growing stronger, especially with the Chinese 
central government having issued the Harmonious Society Policy 
in February 2005. Unfortunately, the China National 
Certification Agency [CNCA], has also raised several concerns 
and is currently taking a sharp look at certifications 
throughout China. They required both facilities seeking 
certification to any social or environmental standard, and also 
the certification bodies to which they have applied, to first 
seek permission from the CNCA before beginning a certification 
audit. The effect has been to curb the rate of certification 
and discourage Chinese certification bodies from applying to 
SAI for accreditation or to audit against SA8000. We are 
feeling this impact directly. As explained above, for us, 
certification is an important point of transparency for a 
business-to-business social compliance program.
    Meanwhile, we know of numerous international organizations 
working in China to improve workplace conditions, thus further 
spurring the debate, but also adding some confusion.
    The Global Compact conference coming up in December 
promises to be another opportunity to elicit support for 
corporate social responsibility in China. SAI, like many other 
organizations, has capacity-building programs there and we are 
seeking to collaborate broadly.
    Finally, my last point. SAI's project right now on the 
ground is to provide training for managers and workers 
together. The project aims to help managers see the benefits of 
running a socially 
responsible business and to enable workers to understand the 
competitive challenges facing the business and how they can use 
voluntary codes and other mechanisms to exercise their rights.
    A few factories in China are seeking to achieve 
certification for the internal benefits, not just because a 
customer has asked for it, rather than something in response to 
those demands from U.S. and European brands. Most, however, 
still seek to comply with SA8000 or other business codes or 
other multi-stakeholder codes, like the Fair Labor Associations 
[FLA], or others, because of foreign pressure. This is a 
problem because monitoring has its limits. Double bookkeeping 
is a well-known common practice, and workers are often fed the 
answers that they are meant to give to the auditors. Even the 
managers who are trying sincerely to meet the standard 
frequently do not understand the concepts behind these codes of 
conduct well enough to communicate those effectively to 
workers. To this end, SAI is seeking to help these managers to 
``own'' the implementation process, not just to prepare for 
social audits.
    SAI is also implementing strategies to encourage worker/
manager dialogue and worker participation in workplace 
improvements within the parameters of Chinese law. Working in 
partnership with several brands, a few suppliers, and local 
NGOs, SAI has developed an innovative training program. It is 
an important training program given China's superpower status 
in manufacturing, with hundreds of thousands of factories. It 
is a huge challenge for any 
actors, businesses, trade unions, and NGOs alike, to improve 
working conditions.
    Any program requires both depth and reach. Since the early 
1990s, all major Western companies have been relying on social 
auditing or monitoring for acceptable working conditions, which 
has significantly raised awareness, at least among their 
primary suppliers, in China. Many have taken corrective actions 
under those requests from the brands and their customers and 
auditors. These days, however, many corporate compliance teams 
have also realized that there are major shortfalls of an audit-
only compliance program: one, that such programs are external 
or imposed; two, there is general agreement that workers are 
the parties most affected and the ones who know the most about 
working conditions. Unfortunately, all social auditing 
programs--even with the best NGO monitors--are challenged as to 
how deeply they can incorporate worker opinion and 
participation. These programs can only help create the space 
for workers, who then need to find their own voice.
    So, in response to a call for more factory ownership of 
compliance programs, SAI, in collaboration with our various 
partners, initiated at the end of 2003, a worker/manager 
training program aimed at deepening worker involvement in the 
factories' implementation program. It is a comprehensive 
training program in which we train all of the workers in a 
factory and the managers, and, after a brief training for 
everyone, there is a dialogue. There is a discussion about how 
the factory measures up against international labor norms, 
codes of conduct like SA8000, and Chinese Labor Law. In the 
factories in which we have conducted this training, the workers 
and the managers agreed that they needed a mechanism to 
continue this dialogue, that this was a useful discussion. By 
November 2004, workers had organized independent nominations 
and elections and established worker committees in three 
factories. Workers and managers in the fourth factory are 
currently working to set something up as well there.
    Since March 2005, project participants have conducted a 
series of evaluations, and what we are finding is interesting. 
The workers are enjoying much better opportunities to air their 
concerns. Per one survey in one factory of 20 percent of the 
workforce, 68 percent stated that the worker committee 
significantly enhanced communication between managers and 
    Worker committees have been increasingly proactive. In one, 
factory representatives are monitoring food quality; in 
another, the worker committee worked together to successfully 
convince the management to adjust unit prices for 80 percent of 
the workers. This is a breakthrough. The ongoing dialogue 
between the two groups has become at least one of the primary 
factors contributing to, at various levels, better retention 
rates, improved wages, and reduced working hours.
    Workers and managers at all the factories participating 
have been far more confident and willing to continue the 
program on their own, and many have acknowledged that the 
program has offered much added value potentially minimizing the 
work needed on factory audits and the consulting that has been 
frequently enlisted to prepare management for those audits.
    A finding probably more critical than all the rest is that 
the pilot project strongly suggests that workers in China do 
care about their rights and identity, in addition to 
recognizing the need for better working conditions.
    Thank you.
    Mr. Dorman. Good. Thank you very much for that statement. I 
am sure it will generate good questions and dialogue.
    Next, I would like to introduce Mr. Dan Viederman. Mr. 
Viederman is Executive Director of Verite. Mr. Viederman became 
Executive Director after three years as director of research, 
where he managed Verite's efforts to assess labor conditions 
for institutional investors, including the California and New 
York State pension systems and government agencies. He has 
spent over 10 years working in Asia with NGOs and businesses 
focused on issues of environmental protection and rural 
development. He served as CEO of World Wildlife Fund's China 
program, where he established the first Beijing office for an 
international environmental organization in China. He has 
worked as country director for China for Catholic Relief 
Services focused on relief and small-scale developmental work 
in China's interior. Mr. Viederman served on the faculty of 
Chongqing Architecture University. A graduate of Yale 
University, he has a master's degree from Columbia University's 
School of International and Public Affairs.
    We might be accused of being biased toward Columbia at this 
particular roundtable. [Laughter.]
    Ms. Rosenbaum. I did not go there. [Laughter.]
    Mr. Viederman. We owe it all to our graduate program.
    Mr. Dorman. Mr. Viederman, you have 10 minutes for your 
opening statement.

                          AMHERST, MA

    Mr. Viederman. Thank you very much. I am trying to think of 
how I can best work off of what Judy was introducing, because 
clearly there is a lot of overlap between the work that SAI 
does and what Verite does. We are not a certifying 
organization. We are a nonprofit that works globally, and 
extensively in China, for over a decade. We started as a social 
monitoring organization, so our expertise and much of our core 
competency remains in the area of going into factories and 
finding out about labor conditions on behalf of international 
    So what I thought I would do is talk in three parts. First, 
what is the picture that monitoring has presented to Verite of 
working conditions in China. I will try and pull out a few key, 
salient points. I am happy to go into as much detail as you 
want about them later. Second, I will talk about some of the 
positive impacts, and certainly some of the limitations, that 
implementing codes of conduct from international corporate 
involvement in China has accomplished. In other words, what has 
been good, what has come out of monitoring against codes that 
is useful, and what are the limitations. Then, third, to talk 
about, from Verite's perspective, some of the key questions 
that remain and some of the steps that we are aiming to take to 
move forward to continue to improve implementation of labor 
standards in China.
    So, first of all, the picture of working conditions in 
China is not a pretty one. Indeed, we believe it is fair to say 
that most, if not all, international brands that are sourcing 
in China are in violation of their own codes of conduct or 
Chinese labor law at one point or another during their sourcing 
experiences in China.
    I am going to speak about the picture of Chinese workplaces 
based on approximately 350 factory audits that we have 
undertaken over the past three years, which we have conducted 
for various international brands in a variety of sectors and 
industries, largely garments and footwear, but including 
others, including hard goods, accessories, and electronics. I 
have four or five main points. The most complex issues that we 
find in China are related to compensation and work hours. This 
is a particularly complex issue for international brands, and 
also for Chinese factories, 
because of the vagueness of the Labor Law itself, which lends 
to constant reinterpretation and a variety of creative forms of 
bookkeeping. In 2004, from a sample of 80 of the factories that 
we audited, only 9 factories did not have overtime hour 
violations, and of those 80 factories surveyed roughly half had 
wage violations related to regular working hours as well. In 
2003, the figures were about similar: 75 percent of factories 
that we audited had overtime wage violations. Over 90 percent 
had overtime hour violations, meaning workers exceeded limits 
on hours or days worked.
    The second area of significant non-compliance with codes 
and with international and domestic labor standards is 
benefits. This is another area where the law is relatively new, 
and designed, promulgated, and implemented in different forms 
across different 
regions and locations. It presents a significant challenge to 
companies that are trying to be in compliance with Chinese 
labor law, and obviously to Chinese factories as well.
    In roughly the same sample of about 80 factories that we 
surveyed in 2004, fewer than 5 were in full compliance with 
benefits laws. Common violations in this area include no 
provision of paid vacation for workers, which is a particularly 
vague area of the Labor Law, and failure to enroll workers in 
the legally mandated social security system. We must note that 
some workers--particularly those who are migrant workers--
choose not to enroll in the system either because they do not 
understand it, or because they do not trust it, or both.
    The third main area of non-compliance that I wanted to 
mention is health and safety. In China, conditions range widely 
and many factors contribute to whether or not a factory is in 
compliance with health and safety requirements, including 
location, the level of local enforcement of safety laws, the 
resources and devotion of the factory management to adequate 
enforcement, the length of time the factory has been in 
operation, and management quality and capacity, among others. 
But health and safety violations of varying severity are 
commonplace in China. Major violations are in the areas of 
machine safety, fire safety, chemical safety, and the provision 
and use of personal protection equipment. According to our 
findings in year 2002, 40 percent of the factories audited had 
machine safety violations. In most cases, the machines lacked 
safety devices. Toxic chemicals were mislabeled and mishandled 
in over 30 percent of the factories, though this may be a low 
estimate. Over half of the factories did not provide, or the 
workers did not use, the appropriate personal protection 
equipment. These are cut-and-dried numbers about violations at 
the factory level that lead to quite severe problems, injuries, 
and even death, for workers.
    Other issues that we find include child labor, which is 
generally not present in export factories, but juvenile labor 
is quite common. This is particularly a function of inadequate 
age verification procedures. Juvenile workers generally do not 
work in accordance with the protections that are legally 
required of juvenile workers, including medical examinations, 
registration with the government, and the limitations on work 
hours. Discrimination is something that we found reported, 
particularly against pregnant applicants and pregnant 
employees, in about 40 percent of the factories that we saw in 
2004. These, then, are some of the standard code of conduct 
issues about which we find endemic violations.
    Having said that, and having painted this relatively bleak 
picture, there are positives that have come out of the 
implementation of codes of conduct by international brands, and 
one of them is that we have access to this picture. In some 
ways, without the implementation of codes of conduct and of the 
regular auditing and monitoring that we do as a result of those 
codes, we would not be able to know what is going on in Chinese 
factories. This is something easy to overlook, and yet 
important to mention, despite the fact, as Judy mentioned, and 
as we as an organization strongly feel, that most of the 
factory monitoring that is undertaken is inadequate in its 
depth and quality.
    Indeed, you can rarely find factories these days that do 
not expect external audits, particularly those that source for 
export industries, and they willingly provide, in most cases, 
some sort of proof of social compliance; whether or not that 
proof is reliable and as thorough as we might like is a 
different question. Significantly, there is movement toward the 
positive in export factories in other ways. This is 
particularly apparent if you take a long enough perspective at 
the issue and look back 10 years, and maybe look forward 10 
    I participated in Verite's annual China sourcing conference 
this summer, where we bring together staff from Chinese 
factories with outside experts and NGOs in China. There was 
something akin to a kind of pass/fail mania going on among the 
Chinese factories. They are very eager for the stamp that will 
allow them to achieve the expectations of their international 
partners. Codes of conduct are a part of the common parlance 
among factory management and ownership of this particular 
cohort of Chinese society. At our conference this summer, we 
presented case studies from two additional factories that have, 
on their own, in many ways in reaction to international codes 
of conduct and the requirements for other brands, come up with 
high impact, significant, and innovative social compliance 
programs that act to the benefit of their workers. There are a 
couple of case studies on our Web site, and I can send those 
case studies to anyone who is interested in seeing what those 
    There is increased acceptance of the kind of worker 
training programs that Verite has undertaken and the kind of 
factory management training and interaction and collaborative 
effort that Ruth will talk about, I assume, and that Judy 
already talked about. So, these are significant positive signs.
    They are, of course, tame in terms of the scale of the 
actual problems and the number of workplaces in China. Despite 
that scale imbalance, these positive developments are still 
important for the potential that they represent.
    The weaknesses in code implementation--i.e., labor 
violations--persist for several reasons. Too often, companies 
do not look carefully enough or with enough intention for the 
problems that they no doubt find, or could find, in their 
supplier factories. Companies are likely to ignore, in many 
cases, their own role in the creation of these problems. 
Sourcing practices are arguably an area where there is a high 
potential for short-term improvement in social compliance 
outcomes, as well as a great deal of control exerted by the 
companies themselves. Factories are too often an object of the 
compliance process rather than a partner. This is a limitation 
of the overall social compliance model as it exists right now. 
The project that Judy mentioned and that Ruth will talk about 
are examples to the contrary, but they do not represent the 
broad condition at this point. In addition, true compliance is 
not valued by the market. Strong social compliance performance 
is infrequently rewarded and, in fact, strong social compliance 
performance is often contradicted by the corporate purchasing 
policies of the brand to which vendor factories are attempting 
to supply.
    Compliance is, at this point, not compelled by Chinese 
regulators due to unclear policies, policy contradictions, as 
well as a fundamental lack of capacity. Furthermore, a 
limitation on the impact of international codes of conduct, 
when we are looking at China as a whole, is quite significant. 
Our look is really through the keyhole presented by export-
oriented sourcing. Our view ignores the vast number of 
workplaces in China that operate beyond the reach of 
international codes of conduct. For example: those producing 
for China's domestic market or for export to other poor Asian 
countries rather than to the West; raw material suppliers down 
the supply chain, including tanneries, embroidery workshops, 
home work areas, and slaughterhouses for the leather that 
becomes shoes; most agricultural workplaces, and workplaces 
exporting in industries which have yet to implement strong 
codes and code implementation mechanisms. Code of conduct 
implementation is an area of effort that is most well-developed 
in the apparel and footwear industries.
    Last, sourcing that takes place out of Guangdong and 
Fujian, where code of conduct monitoring is most active. This 
is something that we have begun to work on more effectively 
because we were brought there by our international partners, as 
their sourcing moves beyond the Guangdong area. In fact, around 
40 percent of the work that we do on a factory audit basis is 
in inland provinces and the Yangtze River delta area. This 
represents a significant shift away from the areas where 
management capacity and civil society are more well-developed 
to be able to deal with the social compliance problems.
    Moving forward, clearly these are problems that we as a 
group of concerned citizens, companies, and organizations need 
to address. The efforts we have collectively undertaken are 
really minuscule in comparison to the level of the problem. To 
us, this points toward an obvious set of approaches, namely, 
that we focus on integrating social compliance performance and 
labor protections within Chinese society; that we have to move 
beyond the small impact of our programs to larger and 
sustainable societal impact. In order to do that, we need to 
ensure that institutions in China develop and maintain 
ownership of meaningful interventions and working conditions in 
CSR. From our perspective, there are three key groups to work 
    Obviously, government is a key player and has an obvious 
role to play. As David mentioned, I come from a background in 
the environmental field in China and saw the development of 
significant and useful collaborative programs between 
international organizations and government in environmental 
protection. I look for the potential to create such programs in 
the CSR or the labor arena as well. Chinese NGOs are a second 
segment of society that needs to be engaged by international 
actors, responsibly and in clear relation to their ability to 
absorb funding. Again, in reference to the environmental field 
where there has been an explosion of the number of NGOs working 
on environmental issues, I look ahead and wonder whether there 
will be a similar explosion of CSR-oriented Chinese NGOs. Then, 
of course, Chinese workers and workers' organizations 
themselves need to be much more fully integrated into workplace 
assessments and the resolution of workplace problems.
    Opportunities exist to expand worker training like we have 
undertaken, worker participation and assessments, like SAI's 
pilot program, and other such programs. We have engaged 
individuals in our annual conference from within the All China 
Federation of Trade Unions in dialogue, and found that in some 
cases we have been able to facilitate a useful dialogue between 
them and some of the companies with which we have been working.
    So, overall, we see a picture where problems are endemic; 
where there is some improvement, which is at this point almost 
anecdotal in its scale; and that sustainable solutions need to 
be developed that come from Chinese institutions themselves. 
The role that we can play best is to help facilitate and 
develop those sustainable institutions. Thank you.
    Mr. Dorman. Good. Thank you very much. Next, we will hear 
from Dr. Ruth Rosenbaum. Dr. Rosenbaum is Executive Director of 
the Center for Reflection, Education, and Action, Inc., a 
economic research and education organization. Dr. Rosenbaum is 
the creator of the Purchasing Power Index, a transcultural 
measurement of the purchasing power of wages used to determine 
what constitutes a sustainable living wage. She is associate 
professor for research at the Labor Education Center at the 
University of Connecticut. She received a bachelor's degree in 
biology and chemistry from Hunter College, master's degrees in 
molecular biology from Hunter College and in theology from 
Manhattan College, and a doctorate in social economics and 
social justice from Boston College.
    Dr. Rosenbaum, thank you for joining us again. You have 10 
minutes for an opening statement.


    Ms. Rosenbaum. Thank you. Every time I listen to that, I 
think of what an eclectic background I bring to all of this.
    Sometimes when I hear my colleagues speak about China, I 
recall that we do a lot of work in a lot of other parts of the 
world also, and it seems to me that what we are describing in 
China, I also could be describing in El Salvador, Guatemala, or 
Kenya. I could be describing so many places around the world. 
So I think we need to keep that in mind, that the enormity, 
just the size of China, makes it seem like it is the center of 
many things or that the problems there are different. But 
honestly, when I look at the work we are doing in other 
countries, the parallels, to me, are simply overwhelming.
    I think we are at a particular time in China where we are 
beginning to see a few things that are changing. Number one, we 
are hearing from factories that there is regional competition 
for workers, that there is a worker shortage. If you think back 
10 years ago when we talked about the labor supply in China 
being unlimited, the fact that factories are now talking about 
a labor shortage and therefore are seen holding onto workers 
that are trained so that they can have an adequate work supply, 
that this is something that might give us a handle to address 
some of the issues that my colleagues have talked about.
    In some parts of China, especially in the Pearl River 
Delta, we are certainly hearing about the problem of energy 
availability. The last few times that I was in China working on 
the project that I am going to describe, there was not a 
factory that does not have at least one day without 
electricity. So, the fact that electricity or energy 
availability is being limited, and that this is an extra cost 
in terms of having to purchase generators to be able to run 
their factories, when you have a factory of 20,000 workers, I 
cannot even imagine what kind of generators we are talking 
about in a situation like that.
    The other thing that has been very obvious to me, since my 
first world really is molecular biology, is the increased rates 
of pollution that we are finding, and also the exhaustion of 
the ground water supply in some areas where the factories have 
been located, and how this is going to play out in terms of 
factories being able to continue to work in certain areas. We 
really do not know. But these are certainly situations that are 
    The three of us have been at the annual conference of 
Business for Social Responsibility [BSR], and in listening to 
speaker after speaker after speaker for the past couple of 
days, and a lot of the meetings that we have had, everybody 
keeps talking about corporate social responsibility. I keep 
wanting to raise the question, why are we doing any of that? 
What is the purpose of it?
    So I am going to tell you up front that for CREA, which is 
what we call our organization instead of our long name, 
corporate social responsibility is bringing about change to 
benefit workers, and in turn benefit their families and the 
communities from which they come and in which they live, and it 
does not make any difference whether that is in China or other 
    So it is not just for the good name of the corporation and 
it is not for the amorphous good that is out there, but we want 
to be able to see tangible, positive change in the lives of the 
workers and the communities. We believe that, in that 
happening, that we are going to see positive change within the 
    What I would like to share with you today is just some 
information about a project that we have been privileged to be 
involved in. It is called Project Kaleidoscope, or Project K, 
for short. It is a cooperative, collaborative project that has 
involved 10 factories, two brands, socially responsible 
investors from the faith-based community, the investment 
community, the Connecticut State government or the Connecticut 
State treasurer's office, research and NGO organizations that 
are also SRI investors, NGOs in China, and academia. That is 
academics in China, and I guess you could talk about myself as 
an academic, even though that is really not the way I would 
describe myself. This project involves factories that produce 
toys, both plastic and plush, apparel factories, and footwear 
factories. So, we have quite a spectrum of involvement.
    What makes this project different? There are a number of 
components that make the project different. Number one, we are 
looking at management as partners in corporate social 
responsibility rather than the object of CSR. I think that this 
has brought about a mind-set change in the minds and ways that 
the management within the factories have received what we have 
proposed and what we have done. In the past, in audit systems--
and again, it does not make any difference whether it is in 
China or in other places--you have outside auditors coming in 
to check on the factories. It is what we call, in shorthand, 
the ``gotcha'' approach. ``Gotcha.'' We caught you at A, B, C, 
D, whatever it is. Now, if you think back to your own 
experiences when you were a child and you went to school, like 
in grammar school, and you had to take a test, and you were 
hoping that the questions were going to be about the things 
that you knew, and the teacher was not going to ask the things 
that you didn't know, the things you were unsure of, and when 
you got the test back, what you had on it most of the time were 
things that were marked wrong. Am I correct? Is that not the 
way you all experienced your tests?
    What we are trying to do, instead of only focusing on the 
things that are wrong, we are trying to focus on the things 
that are right and helping them to grow. So to give back an 
exam that would have the things marked right, and then ask how 
do you increase that, rather than only the things that are 
wrong. It is a change in respect or a change in the way we have 
been showing our respect for what factory managers, factory 
workers, and so on have been trying to do. In this new program, 
this Project Kaleidoscope, as we call it, we are trying to help 
everybody see things in a new way. I have two things that I use 
to illustrate this point. I usually have them with me, and I do 
not now, I am sorry. One is like a tubular, multi-lensed thing. 
It is like a cone shape and has a multi-lens at the end. If you 
look through that, you see the exact same thing over and over 
and over again. It is almost like an insect's eye. That is 
different from a kaleidoscope, in which you have a set of 
pieces inside a tube, but as you rotate them you see something 
different. That is essentially what we are trying to do with 
management, with workers, with supervisors within the factory, 
that is to say, when you look at what is going on here, how do 
you look at it, and look at it in a different way.
    The new program, Project Kaleidoscope, has asked the 
factory management, working with their supervisors and worker 
representatives, to design systems in the factory. The purpose 
of these systems--and this is my shorthand, not the project 
shorthand--is to find things that need to be fixed, to fix 
them, and then to learn from that and prevent them from 
happening again. So my three key words in the project are: 
find, fix, and prevent.
    And they can tell us about what they found, tell us how 
they fixed it, and to tell us the systems that they have set in 
place to prevent these things in the future. It is very 
different from having outside auditors coming in and saying, 
``We have found it, now you have to go fix it, and, well, 
prevention will just be, did we find it again the next time? '' 
In this process or in this new way of looking at things, the 
factory has become a partner in this ``find, fix, and prevent'' 
process. It is a systems-based approach in which we have asked 
the factories to take a look at anything that might go wrong, 
try to prevent it, but to help everybody understand how they 
participate in this effort.
    Everybody in the factory has been involved--workers, line 
managers, supervisors, senior management. On all levels, we 
have had to do education, we have had to do training, and 
especially we have had to do capacity building. The capacity 
building has been necessary on every single level. It is one 
thing to know something, it is another thing to be able to make 
it operational. What we have emphasized is that everybody has 
the responsibility and everybody has the ``response-ability,'' 
the ability to respond when something happens, and that to 
respond when something happens is a positive rather than 
saying, ``I do not want to get involved, I am going to hide and 
not be part of whatever this problem is.'' We have tried to 
work with the factories to develop internal systems that are 
particular to the factory. The smallest factory has about 370 
workers, the largest factory is almost 20,000 workers. Only 
part of that 20,000 produce for the brand that is involved in 
the project.
    But the biggest issue for us has been capacity building at 
all these levels. One of the training programs that we have 
used has helped to create communication between the different 
levels within the factory.
    A lot of it has had to do with answering the question, 
``How do we do this with an atmosphere or with behavior that is 
respectful of the efforts that have gone on beforehand? '' And, 
so just to tell you a story: I was walking around in one of the 
largest factories in the project with the factory manager, and 
we just happened to be talking to each other. And we got to one 
floor of the factory and I said to him, ``Is this not curious? 
'' I said, ``All of these lines in this part of the factory are 
set up for production, but when we get over there everything is 
set up in clusters.'' I said, ``Gee, do you have any idea why 
the clusters are there? '' He said, ``Oh, I will go fix them.'' 
I said, ``Wait. Why do we not find out why it happened? '' 
Well, it turned out that the workers had created the clusters 
slowly, over time, because handing down what they were working 
on, handing things down the production line, was not as 
efficient for them as being able to hand it to the side, so 
what they had done is created a square, and they were just able 
to pass it around in the square and then hand it on when they 
were done. So, that was the first thing.
    Then we were walking around. And again, because my 
background is in molecular biology, every time I go by an 
exhaust system I put my hand underneath to see if it is on, 
having been in numerous factories where you have these huge 
systems and there is no vacuum or no suction. So I stuck my 
hand underneath and I said to the manager, ``Where does it 
vent? Outside? '' He looked at me and he said, ``I do not 
know.'' We walked the entire factory as he was showing me 
around--and there were many floors, like seven or eight floors 
to this--and we followed the vent system. It was like this big 
adventure. We followed the vent system. He said to me, ``I do 
not even know if it has a filter on the outside.'' So we 
looked. We got outside, and sure enough, there was a filter on 
the outside and it was clean. It was relatively clean. I said, 
``Whose job is it to keep it clean or to change the filter when 
it is dirty? '' He said, ``I do not know.'' This was wonderful. 
Everything was good. It was the way it was supposed to be. But 
who was responsible for keeping it that way? Was it chance? Was 
it just chance that it happened to be clean that day?
    By the time we went back the second time, he knew who was 
responsible, and also if that person was not there or if that 
team of people were not there, who was going to be responsible 
to train somebody else to change the filter, and to dispose of 
the dirty filter. They do not really dispose of them, they 
clean them. The point being that sometimes there are good 
things happening there and they do not really know how it is 
happening or why it is happening.
    The manager said to me afterward, ``You are a very good 
teacher.'' And I am not telling you this story because of what 
he said to me. I said, ``What do you mean? '' He said, ``I did 
not feel embarrassed by any of the questions you were asking 
me.'' For me, that was a huge learning experience. In the 
audits, they are embarrassed. They feel awkward, they feel 
embarrassed, they feel on the spot.
    Now, our process for this Project K is as rigorous as 
traditional auditing. It goes into absolutely every aspect of 
everything that goes on, not only in the factory itself, but in 
the dormitories, in the cafeteria, et cetera. But the 
embarrassment piece is gone because we are asking them to 
figure out the things that need to be fixed, and to do that 
with getting feedback from their workers. With participation in 
this new approach, we have already seen a change in the 
factories. Rather than being concerned about what an audit may 
find, the internal self-correcting systems that they have 
designed address these concerns and so they are happy to tell 
us about them. There are some consistent problems that remain. 
Excessive overtime and working hours, we consistently find 
this, and then I would say the whole question of wage levels. 
But I would like to suggest, and to build on what my colleagues 
spoke about, that excessive overtime and the extension of 
working hours is not always the responsibility of the factory 
itself, but many times has to do with the sourcing practices of 
the many brands that are in the factories.
    The example I used when we presented this yesterday at the 
BSR conference is: I am at an NGO and I get a call on Thursday 
just as I am closing down for the day. I am the Executive 
Director, and somebody says, ``Ruth, we need this report on 
Monday morning.'' I know that that means Thursday night, 
Friday, Friday night, and probably Saturday and Sunday, I am 
going to have to work on this report. That is excessive 
overtime, folks. It happens to everybody who is sitting in this 
room, I would be willing to bet. Why? Part of it has to do with 
planning. The other part of it has to do with the sourcing 
practices and brands and nobody wanting to assume the risk of 
having supply on hand. So they have pushed it down with just-
in-time production and lean manufacturing and so on, so it is 
the factory that has to assume all that risk. The factory does 
not want to assume the risk of overproduction either, so what 
do they do? They wait to see whether they have the orders. So, 
somehow within all of this we have to come up with some way of 
addressing this part of the problem.
    The piece that continues to be of concern to me, and this 
is because of the work we do really around the world, is the 
sustainable living wage. The wage levels in Chinese factories 
need to go up. The fact that there are many workers that are 
willing to work at those wage levels is not the same thing as 
saying that those wages really provide enough purchasing power 
for the workers to have a dignified standard of living.
    As we are seeing the deconstruction of the hukou system and 
as we are seeing more and more workers not return to their 
villages and stay within the towns and cities where the 
factories are located, those workers are going to want to be 
able to get married and to be able to support their families, 
to have children, send their children to school, et cetera. I 
cannot imagine that those things are going to take place 
without the demand for wages to go up, so I think that this is 
something that we are going to see in the future.
    The last thing I would say is that with the educational 
materials that the factories have developed, some of the 
factories, when we were there in June, had big charts on the 
self-auditing they had done and the things they had found. They 
were big charts. They are posted for all the workers to see, 
for everybody to see. The workers will stand there and they 
will translate them for us. Anyway, they were able to show us 
what the progress is, what it is that they are trying to do to 
improve. We now hear factory management saying, ``We want to be 
a code of conduct [COC] factory.'' This, to me, says that in 
some way, shape, or form, we have gotten the message across. 
What it is going to take to fully implement all of that? Of 
course, that is going to take time. But I do think that there 
are changes that we are beginning to see that give me hope. I 
wish that when I was in other parts of the world there would be 
the same response. I am still waiting to go into my first 
factory in Central America where a factory manager says, ``Gee, 
we want to be a COC factory.'' Right, Judy? Have you ever heard 
it? I have not heard it either.
    So, thank you very much.
    Mr. Dorman. Good. Very important and very interesting 
statements. So, we will move into the question and answer 
phase. But, first, I would like to check with the audience. Can 
everybody hear us in the back? Are we doing all right, speaking 
loud enough? Good. I will start with a question for each of you 
and then we will move down the dais to other staff that will 
have questions.
    Judy, in your statement, you said that the Chinese 
Government is running an examination of standards right now, 
and part of the outcome of this examination has been decreasing 
interest in applying for such standards. Did I understand you 
    Ms. Gearhart. Yes.
    Mr. Dorman. Do you believe that this policy originates with 
the central government, and this review is driven by the 
central government? That is the first part of my question.
    The second part is whether or not it is your sense that 
this decreased interest, or the decreasing numbers of 
applications, is an intended outcome of this policy or an 
unintended outcome?
    Ms. Gearhart. The organization that is looking at 
certifications in the process is the CNCA, which is the 
government agency overseeing accreditation activity in the 
country. As I mentioned in my remarks, there appear to be 
varying views within the different government organizations, 
and the whole concept of corporate social responsibility is 
still very much being defined by how people are viewing it, and 
I think people are changing their views as we speak, so it is 
in flux.
    Whether or not the consequences will be limiting in the 
long term is unclear, but it seems that has been the effect up 
to now. I do not have a determined conclusion yet whether it is 
intended or unintended.
    We are in conversations with them. So far, I think that is 
positive, that we are talking with them directly and we are 
looking at how to understand each other better. But it is 
something to watch, is all I would say.
    Mr. Dorman. Mr. Viederman, Dr. Rosenbaum, any comments on 
that? I have an additional question, but I thought you may have 
something to add.
    Mr. Viederman. I think, clearly, there is a lot of debate 
going on in China, as elsewhere, about what role certification 
plays. In China, there is an added political component to this 
debate, and certainly it seems to us that there is an effort to 
create a ``certification with Chinese characteristics,'' some 
sort of domestically more acceptable model. I think it is 
unclear at this point, bureaucratically, how much broad sway 
that this certification effort has.
    Then again, it is clearly an indication on the part of some 
segment of the government that CSR is something to be endorsed 
in one way, shape, or form. We could quarrel about the specific 
certification standard, but the fact that it is clearly stated 
as a topic that is up for discussion is, as Judy says, worth 
paying attention to.
    Mr. Dorman. Good.
    Ms. Rosenbaum. I agree with what my colleagues have said. 
The only thing I would add is I think part of it has to do with 
national pride, instead of having CSR being imposed from the 
outside, an effort to make it something that is owned within 
China and to come up with a Chinese standard of doing it, 
which, if we can get the standard to match the kinds of 
standards that are already out there, would raise the standard.
    Mr. Dorman. Mr. Viederman and Dr. Rosenbaum, in terms of 
the auditing process, can you give us a sense of the level of 
interest by local governments, and by local trade unions. Are 
they interested in what you are doing, the outcome? Are they 
    Ms. Rosenbaum. Well, I know that before we started Project 
K, the brands were in dialogue with the government on a whole 
variety of levels to make sure that we had buy-in from them, 
that there was not going to be any negative repercussions and 
so on. But that is pretty much it. We have not heard anything 
else since then.
    Mr. Viederman. The formal auditing that we do tends to 
happen without any significant involvement from government 
agencies. Clearly they are aware of it, as a significant 
manifestation of international interest in Chinese factories, 
and there are members of the bureaucracy, or ex-members of the 
Chinese labor bureaucracy who have begun to participate in one 
way, shape, or form in factory assessments, or as consultants, 
and in helping to improve factory conditions. So there is a 
sort of an informal interaction, but from our perspective there 
has not been either a real formal endorsement of, or 
interaction with, the audit process that we have undertaken.
    Mr. Dorman. Good. Well, thank you.
    Ms. Rosenbaum. Just one other thing. One of the things we 
have insisted on as part of this project is that every factory 
that is involved has an active worker committee, and not just a 
worker committee, but an active worker committee, and that 
membership in the worker committee is something that workers 
have the option to join if they want to join it. So the whole 
idea of worker representatives, or for the workers, having the 
idea that they have the right to have somebody represent them, 
is something that we are really trying to grow within the 
factory. So far, it seems to be progressing. That is probably 
the best way to describe it.
    Mr. Dorman. Thank you.
    I am going to turn my questioning over to my colleague, 
John Foarde, who is Staff Director on the Commission for our 
Co-Chairman, Representative Jim Leach.
    Mr. Foarde. Thank you, Dave.
    First of all, thanks to all three of you for being here 
this afternoon and taking time out from the conference to come 
over and share your views with us. Dan and Ruth have been 
panelists before at CECC roundtables, so welcome back. Judy, 
this is your first time, and I hope not your last.
    I would like to pick up on the theme that Dave was 
questioning you about just a moment ago, but turn it around a 
little bit and ask you for your views on what it would take, 
from the central government level, to push along, and what sort 
of changes would it take, to make CSR and perhaps SA8000 as a 
standard, and sustainable wage and environmental standards, 
really work in China, not only in the export sectors that most 
of you are working in, but also in the internal sector? What 
sort of policy changes, what sort of attitude changes, and what 
is the likelihood of that happening?
    Mr. Viederman. I think the one area of clear need is 
increased capacity, and I would say increased expertise on the 
part of the people who are tasked with doing factory 
inspections for the government. There is just a fundamental 
lack of capacity, a bureaucratic gap in their ability to 
achieve the relatively high standards that are written into 
Chinese law.
    One significant intervention would be to make a commitment 
at a national level, and at a local level as well, that such 
capacity gaps should be filled. There also are clarifications 
that are needed of the law itself and the regulations that 
implement the law that would be beneficial to international 
companies sourcing in China in their interaction with Chinese 
factories, particularly in the newer manifestations of the 
Chinese Labor Law, the newer pieces on benefits, and in the 
area of overtime. So I see a clear need there, and a role for 
those of us on the outside to play in bringing that expertise 
and that capacity to facilitate improved implementation of the 
    As for what kind of attitude change needs to happen, I find 
it significant that there is an official Chinese standard, in 
the sense that it is an attitude change. The bureaucratic 
commitment is there; and whether or not it becomes reality, at 
least it is something for people to organize around. I think 
that it is a significant statement there that we can make use 
of. But the attitude change is a relatively bigger piece, I 
think, even than the capacity change.
    Ms. Rosenbaum. The other thing that we also hear from 
factories is that they would like to see some sort of--what is 
the word I want--they would like to see the laws on the local 
level and on the national level at least match.
    Mr. Foarde. Harmonization?
    Ms. Rosenbaum. Harmonization. That is a very good word. 
Thank you. They would like to see these laws harmonized. 
Because it is like, if you do one then you are not going to be 
in compliance with the other, and so on. So, part of it is the 
notion that you do not have to be in compliance with either 
one, so the whole idea of standardizing or harmonizing the laws 
and regulations so that it is possible to come up with some 
kind of unified set of standards, this step would really be 
helpful. Then I echo what Dan said about the capacity of 
    Mr. Foarde. Along those same lines, do you get the sense 
from the types of discussions that you are having that people 
are looking for a commitment, a public commitment on the part 
of central government authorities, perhaps from the political 
leadership at the very top, to this sort of thing because they 
are not sure whether or not it might be accepted?
    Ms. Rosenbaum. I do not know. I have not heard that as much 
as, you kind of hear that CSR is something that the government 
is pushing. But to say it is has come down as a mandate, that 
you have to do it, I have not heard it that strongly yet. But 
you do get the feeling that it is out there and everybody knows 
that it is out there. That certainly has been a change, I 
think, in the past two years.
    Mr. Foarde. Thank you.
    Ms. Gearhart. There were several conferences canceled 
earlier this year, so I think there are some concerns as to how 
much the discussion around corporate social responsibility can 
move forward easily. So to speak to your first question, my two 
main recommendations are going back to encouraging the national 
corporate social responsibility dialogue and discussion and 
looking at how to make that more organic to China and, as Dan 
mentioned, looking at not just the export industries, but the 
other industries, the growing Chinese domestic companies and 
how they are looking at these issues.
    The other point I would make is that it is important to 
clarify the complementarity between voluntary mechanisms, codes 
of conduct or other voluntary initiatives, and government 
regulations. I think that international actors should seek to 
clarify that CSR and voluntary codes of conduct are not a 
substitute for government 
regulation. The voluntary initiatives are really a 
reinforcement of support, a tool, really, for employers and 
factory managers to move forward and understand. I think for 
many of us, the management systems element is a core component 
that Ruth talked about, and it is one of the core requirements 
of the SA8000 standard. We are not just talking about a 
checklist approach to improving labor conditions, but really 
about improving how businesses are run and the sustainability 
of businesses, and the long-term vision of those businesses.
    Ms. Rosenbaum. The last time I was here before the 
Commission staff, one of the things I said, just to build on 
what Judy said, one of the questions that I raised, was how 
appropriate it is or inappropriate it is to have corporations 
creating an environmental standard or creating labor standards? 
I offered the view that this is really the role of government 
acting on behalf of its citizens. I would say that that still 
is the major question. It is part of what I think you are 
asking in terms of what the role of the Chinese Government 
should be. I think that it should be the organization or the 
entity that says, ``This is what the standard should be.'' Our 
hope is that they would be as high, if not higher, than the 
kinds of standards we have had in CSR and that they would 
apply, as you were saying, across the board both for Chinese 
production for China and for production for export. But that is 
really their responsibility.
    Mr. Foarde. Thank you. Very useful.
    Mr. Dorman. Good. Thank you, John. Next, I would like to 
recognize Mr. Chris Mitchell, who is Legislative Director for 
Representative Mike Honda, a CECC Member.
    Mr. Mitchell. Thanks. Ms. Gearhart and Dr. Rosenbaum, I 
think you hit on what I was going to ask you to elaborate on, 
and that is, just in general, management and practices. It 
seems like improvements in corporate social responsibility are 
so linked to better management practices. So that leads to the 
question, how well are some of these NGOs that look at 
corporate responsibility working with other organizations that 
focus on management practices that have experience working with 
local Chinese companies?
    Ms. Gearhart. I think that local NGOs in China are going 
through growing pains or a learning curve, if you will. Most of 
them are very new. Even the kind of institutional 
infrastructure that it takes to run an organization, train and 
maintain staff, etc. takes time to build; so things are in flux 
on that level.
    In March, we held an informal discussion with several of 
the organizations that are doing manager training or worker-
manager training. Many of these are locally based NGOs. In 
those discussions, I found that the consensus among the group, 
for example, is that, yes, worker training is important, but 
manager training is equally as important, as I mentioned in my 
remarks. Even if managers are trying sincerely to implement a 
CSR management program and respect workers' rights, it is 
something they have not dealt with before. As we said, you see 
that the world over. I mean, people do not usually study these 
issues when they set out to be factory managers.
    So I would say that I found the NGOs to be quite aware and 
thinking about how to relate to managers. As for what their 
experience levels are, I think everybody is looking at how to 
do this work in new and innovative ways, and sometimes you find 
management consultants that have the longest running experience 
of training managers and they are not necessarily the ones that 
are going to be the most effective trainers on social issues. 
They can be very effective, but sometimes the NGOs bring in a 
new, fresh perspective. The ideal is to have a multi-
disciplinary team.
    Mr. Mitchell. Yes.
    Ms. Rosenbaum. Our experience has been that when you have a 
team that is working with management, with the rest of the 
factory, then you have this spectrum of abilities, and a 
spectrum of experiences. It is part of what we have had in 
Project K. There is a group of people working together and none 
of us has all the experience that is needed, but different 
people have had it. At the same time as we have been working 
together, we have each then been gaining experience from the 
expertise of the others in the group. So we will be able to 
multiply that, both here in the United States in terms of 
working with brands, and the groups that are in China, the 
expertise they have been sharing with us, and vice versa. The 
number of groups, the number of organizations, the number of 
people with expertise that are needed to really do this, I 
would say we are a drop in the ocean right now, to be honest 
with you. It is long, hard work.
    Mr. Mitchell. With respect to some of the practices by U.S. 
companies that may lead to excessive overtime and some of these 
other issues that we are concerned about, to what degree have 
U.S. companies started to alter their purchasing policies, 
either as part of this Project Kaleidoscope or any other 
    Mr. Viederman. I think it is in the very early stages. I 
think it is one of the newer topics in the discussion, 
particularly around overseas labor standards. I think a few 
companies are explicitly identifying, in public reports, that 
this is an issue that they recognize is a contribution on their 
part to the difficult and persistent problems at the factory 
level. There is certainly dialogue going on about best 
practices or better practices, and it is not something that has 
achieved either widespread acceptability among U.S. or European 
companies or brands, though it is certainly a part of the 
dialogue that factories have with the brands.
    In fact, Verite did a study on the problem of overtime a 
couple of years ago, looking at brand practice, looking at 
worker perception, looking at manager perception. The leading 
response from managers was that they wanted better 
communication with the brands to whom they were selling. So, 
they certainly see that it is an issue that needs to be 
addressed, and I think the brands here are beginning--in some 
cases, not all--to understand that and to reflect it .
    Ms. Rosenbaum. Yes. It is just the very beginning stages. I 
would echo what Dan is saying. What we have the managers 
pleading for is to level the load, because that allows them to 
have a workforce that they can maintain and to keep those 
workers busy, to employ them at full capacity, and yet not have 
to do the excessive overtime. And how the brands are going to 
do that, both in Europe and in the United States, that is still 
a work in progress, shall we say. But at least some are 
beginning to hear it.
    Ms. Gearhart. I think it is a collective action problem 
because this has been an issue raised for us. We had a 
conference in China in 2001 and some of the brands that were 
there spoke up and opened the door for this to become a 
discussion. We never had a chattier conference in China before 
that, but the suppliers really wanted to talk about this issue.
    However, some of the brands we work with that have tried to 
change the timing of their orders or the way they are doing 
their orders to address this issue, report that most factories 
turn around and take orders from other brands. So, unless there 
is a system-wide change--and I think Ruth's mentioning of the 
just-in-time practices is part of it, it will be difficult to 
sustain change. I mean, it used to be something, 10 years ago, 
everybody was complaining about. Now it has sort of dropped out 
of the common discussion. How do you bring the brands together 
in order to address this?
    I think one positive step forward, besides the fact that 
this is a relatively hot topic now in these discussions, that 
it is going along with a moment when major brands are beginning 
to publish their supplier lists and they are beginning to share 
information about factories. That sharing of information about 
the social compliance of factories and the supplier lists, and 
everything, is, I think, another important part to bringing 
these problems toward a collective action solution; that could 
help change how these orders happen.
    Ms. Rosenbaum. I guess I really hope that you are right, 
Judy. I just know, when the FLA and the Worker's Rights 
Consortium [WRC] were formed, one of the things we did at CREA 
was assemble this enormous data base with all the factories, 
all the universities that were either in the WRC or the FLA. It 
was all the 
factories or anything that they had at their university level 
on it where they produced. So we were able to--we still are 
able--to look in a country and say these are all the 
universities that produce there, therefore, these are all the 
brands that are in there. We offered that information to 
anybody who wanted it and we could not get anybody--anybody--to 
use it in terms of any kind of cooperative sourcing.
    So it is my hope that now that this problem has been around 
long enough, that maybe--we may have to just wait until 
something hits the moment to address it--it is going to begin 
to come up again, but it is still a problem that is on the 
table. And I am not sure it is solvable at the factory level. I 
really think it has to be solved in terms of order placement. I 
said this yesterday at the conference when I spoke. It was not 
the most popular thing I have ever said to a group of brands. 
There was dead silence in the room when I said it.
    Mr. Dorman. Good. Thank you. I would like to turn the 
questioning over to Dr. Kate Kaup, who is a Special Advisor on 
the Commission staff.
    Ms. Kaup. Thank you very much. I would like to ask Dan a 
question and then I have a related question for all of the 
    Dan, you mentioned that in Verite's audits you found a good 
deal of discrimination against pregnant women. Did you also 
find discrimination against ethnic minorities?
    And for all of our witnesses, will you please tell us if 
most of your work is conducted primarily in the east coast or 
do you also focus on western areas? Do you conduct any work in 
Xinjiang? You mentioned that 40 percent of your work is 
conducted in the 
interior. Could you please clarify what you consider to be the 
``interior? ''
    Mr. Viederman. Not the very interior yet. Coastal interior. 
Ethnic discrimination is not a problem that has come up as a 
priority finding, especially in southern Chinese factories. 
When we say ``interior,'' we are talking more about upriver 
from Shanghai on the Yangtze River. So, Anhui, certainly to 
Jiangsu, Jiangxi, but not much farther west than that at this 
    Ms. Kaup. Is that a result of having trouble getting proper 
approval to go out west or just of having your hands full on 
the east coast?
    Mr. Viederman. I think it is a question, because we will go 
in when brands ask us to go essentially in response to where 
they are sourcing. They are still sourcing closer to the coast, 
probably purely for transportation and logistical reasons.
    I was having a conversation with someone the other day who 
described factories eager to take advantage of wage 
differentials between coastal areas and inland, poorer areas, 
you know, even on the order of a few hours' drive. I think it 
is only a matter of time until sourcing increasingly pushes 
inland simply because the transport networks are improving.
    Ms. Rosenbaum. Just to make you laugh, the only 
discriminatory issue that came up had to do with food that was 
appropriate to where the workers came from. In one factory, 
this was a very big issue, whether it would be spicy or not 
spicy. The factory solved it by having two types of food 
    But aside from the pregnancy issue which is there, or has 
been there at different times, not so much in this project 
because it is addressed directly in the project, well, that 
really is the only issue that has shown up. We have not seen 
anything in terms of ethnic minorities at all.
    Ms. Gearhart. And how far out were you?
    Ms. Rosenbaum. Not very far at all. Again, the same answer 
as Dan. The brands are facilitating access for these programs 
at the moment. But there has been some interest in other areas.
    We cover more than apparel and footwear, so to the extent 
that the agriculture production sector starts to look at 
standards, SA8000 would be a tool that could be used, but it 
has not really happened yet. We are talking to some brands that 
are looking at the whole supply chain down to the cotton 
production, so that may be on the horizon.
    Ms. Kaup. May I ask a couple more questions?
    Mr. Dorman. Yes.
    Ms. Kaup. It is not really a follow-up question. Dan, you 
mentioned domestic Chinese NGOs and their involvement with CSR. 
Could you please discuss the challenges that Chinese NGOs face 
compared to those faced by international NGOs?
    Mr. Viederman. Sure. Domestic Chinese NGOs face a very 
uncertain--what is the right phrase--legal environment in which 
they can exist. International NGOs, for that matter, do as 
well, but it is obviously of less risk to international NGOs 
than it is for Chinese NGOs. Certainly those NGOs that are 
working on labor issues particularly can run into conflict with 
institutions that want to promote economic growth, or 
entrenched economic interests within particular factory groups.
    My experience has been that NGOs in China are still 
generally in the personality phase of organizational 
development, so there is not sort of a strong, institutional 
understanding or societal understanding of what role an NGO 
plays and how it differs from other institutions. Therefore, it 
is rare to find people who can effectively manage the difficult 
institutional environment that NGOs face in China. That 
difficult environment limits the number of people who can 
effectively work within NGOs, and a limitation on increasing 
their professionalism. Not to say that there are not some 
striking examples, because there are, but it is not certainly a 
widespread phenomenon at this point. It is really in some ways 
a systemic challenge for the organizations themselves.
    Mr. Dorman. I should have mentioned that Dr. Kaup is our 
Special Advisor on Ethnic and Minority Affairs, but you might 
have guessed that by her questions.
    Mr. Viederman. I figured that out. [Laughter.]
    Ms. Kaup. That is helpful. Thank you.
    Mr. Dorman. Next, I would like to introduce Adam Bobrow, 
who is a Senior Counsel for Commercial Rule of Law on the 
Commission staff.
    Mr. Bobrow. Thank you to all the members of the panel for 
being here. I have two things which are totally unrelated, but 
one picks up on what Chris Mitchell asked. Are there any 
efforts, are there any thoughts, about working with what the 
companies would call the demand side? It seems as though the 
brands have an interest and they attempt to market some 
advantage that they have because, let us say, outside of the 
China context, the advantages that are created by having a 
product that is produced in a responsible manner. But actually, 
if it were inside China, it seems to me that you would need to 
develop a consumer desire for products produced that create a 
sustainable wage or that are done in a way that does not impact 
workers in a strongly negative way. So is there any move toward 
consumer education or public education on the issues of 
sustainable wage?
    Ms. Rosenbaum. In the United States or in China?
    Mr. Bobrow. In China. I mean, is there any support for 
    Ms. Rosenbaum. We have been contacted by a few folks who 
are connected to organizations--that is all I can say about 
them--where the whole idea of doing some kind of sustainable 
living wage study--in fact, in two instances, we have even 
trained people on how to do it. But it has really been deemed 
too dangerous to do right now. So in terms of the wage issue, 
it is a very difficult landscape, but that is not just in 
China, that is true in a variety of places.
    I think the first question would be getting people to be 
paid the legal wages to which they are entitled, both for 
regular time and for overtime. So then what a sustainable 
living wage would be, would be some place above that. I do not 
know. I have not heard of anything except from NGOs or people 
who are teaching in the university who are teaching about some 
of these things, but not the same kind of consumer demand or 
questions that are being raised throughout the United States. I 
have not heard anything like that. I do not know.
    Mr. Viederman. I would say it is only a matter of time. 
There is certainly no institutional structure yet that seems to 
be pushing those sorts of issues in a formal way. But just as 
there is sort of a noticeable, if small, demand for so-called 
``green food,'' or organically certified food, according to 
Chinese organic standards as well as other environmentally 
sensitive products, and there are brands that have developed in 
China around that marketing angle, much as there are brands 
elsewhere. It is probably only a matter of time until someone 
tries to exploit that market purely from a commercial side. But 
I am not aware of it happening yet, in the sense that someone 
is marketing a domestically branded sweatshop-free garment.
    Ms. Rosenbaum. I think the question is how dangerous would 
it be for somebody to try to do that. The word that came back 
to us in terms of the wage issue, was that it would be 
dangerous to try begin that kind of a public conversation. That 
was just a couple of months ago.
    Ms. Gearhart. Last year there were some legal shifts that 
make it easier for retailers to open up shop in China, so you 
will see more Wal-Marts and more Carrefours, and more of these 
international branded retailers in China. The retailers 
interact with the consumer market very differently than the 
international brands, which are mostly going there to export. 
Also, the auto industry, I think, is another place to look.
    The industries that are really looking at the Chinese 
consumer market are the industries that need to be brought into 
the efforts to promote CSR. I mean, this whole CSR debate, if 
you go to the BSR conference that we are all here for, you do 
not just see apparel and footwear. It is a broader discussion. 
So how do you bring those groups together to then talk within 
China? Hopefully, the Global Compact conference in December 
will spark some of that.
    Mr. Dorman. I would like to turn the questioning over to 
Pat Dyson, who is Senior Counsel for Labor Affairs on the 
Commission staff.
    Ms. Dyson. First, I want to thank you very much. I called 
most of you to ask you to come, and thanks for coming. It is 
very enlightening for all of us.
    I wanted to ask Dan and Ruth: how much do you think workers 
know about their own rights before you come to train them and 
give them some idea? Do they know that they should have 
overtime pay? Do they know what overtime is? Do they know what 
the minimum wage is that they should be getting when you go 
into a community?
    Mr. Viederman. In a word, no. Not much.
    Ms. Rosenbaum. Yes, I agree. No, not much.
    Mr. Viederman. And, in fact, one of the findings that we 
frequently see in our factory audits is that information is not 
shared with workers, as most brand codes require it to be. So 
there is little transparency internally in the workplace, not 
to mention the complication of figuring out whether someone is 
working on a piece rate or whether the overtime is paid on the 
piece rate. I cannot even figure it out and I have looked at 
lots of these documents. It is very complex.
    Ms. Dyson. So I assume there is no poster like we have in 
our workplace here saying what the minimum wage is.
    Ms. Rosenbaum. Now there is, with this project. In some of 
the factories I have been in, I also have seen the posters. But 
in terms of how to figure it out, one of the things that a 
number of the factories that are part of this project have done 
is to set up computer systems to which the workers have access. 
They can put in their name, they can put in the number of hours 
that they have worked for that pay period, and it says right in 
there how much of it is regular time, how much of it is 
overtime, how close they are to meeting their piece rate that 
they have to meet. The workers can stand there. Obviously, 
somebody is translating for me. I mean, Dan speaks Chinese, I 
do not. They can just go through and just tell you how the 
whole thing works. So, the education that has been done is 
really to help the workers understand all of this.
    One of the systems that we have really insisted on be set 
up in the factories, when a worker has a question about his or 
her paycheck, who do they go to? We teach them how to ask the 
appropriate questions; not, there is a problem with my 
paycheck, but I see this, I see this, or whatever kind of 
thing. So, to help them to be able to verbalize that is 
something we have worked very hard on doing.
    Ms. Gearhart. Through the worker training project that we 
have been doing, I think the workers have learned very quickly, 
to the point where I think they have brought ideas to the 
table. So, for example, one worker committee that actually 
addressed wage levels and overtime rates.
    One of the complicated things that we have heard before 
from auditors or from compliance officers at different brands, 
is that it is difficult to calculate overtime premiums because 
of the piece rate; so how do you figure that out without 
creating too much extra work for the payroll department? From 
the reports we have gotten from the factories, the workers on 
the worker committee had ways to look at that and figure out a 
system. How they define it and how they look at it may not be 
in the same language we would use, but I think they are very 
    Also, of course, education levels have varied depending on 
the factories we are in. We find workforces that have very 
different average education levels. But that does not seem to 
necessarily determine how quickly they are able to uptake and 
understand the issues. It just may determine how quickly and 
strongly they want to move forward on addressing the issues.
    Ms. Rosenbaum. One of the things you have done, too--I have 
done this in the past with the factory managers--is to say to 
them, ``How do you figure out the piece rate in terms of 
overtime? I want to see exactly how you do it. What are the 
formulas you use? '' If the answer is, like, ``Well, you know, 
we really do not have a formula,'' we ask, ''Well, how do you 
do it then? Is it a spinning wheel and you throw a dart? I 
mean, what is it that you use? '' The more you pin them down 
and the more you ask them exactly how do they do it, then that 
is something that can be transferred to the workers. So it is 
difficult. The whole relationship of piece rate and overtime is 
difficult, but they have to have a formula to do it. Then there 
is the question of, does the formula comply with the Labor Law, 
but first you have to know exactly what method they are using 
and to really push them until you get it.
    Ms. Gearhart. One thing I wanted to add. One of the impacts 
we have seen from the worker committee process and worker/
manager dialogue, is that some of the workers reported that 
they now see themselves differently. I am certainly not a 
Chinese linguist, but the language change for them is 
apparently significant; going from considering themselves 
migrant workers to workers is a status jump up within their 
context and thus has been important for them. They have 
reported feeling that now that they have gotten this dialogue 
and this participation, that they now feel like workers, which 
is a positive point and necessary to helping them to claim 
their rights.
    Ms. Rosenbaum. Another thing we have done with managers, is 
to say, ``Do you look at your workers as a cost or do you look 
at them as an asset? Because without your workers you cannot 
produce.'' Just raising the question has been startling in some 
of the factories. They said, ``We only look at them as a cost, 
almost like a piece of machinery.'' If you look at them as an 
asset that enables you to grow your business and to operate in 
a responsible, on-time way, then you are going to look at your 
workers in a totally different manner. So, just those kinds of 
wording things, just the way we asked the questions, has really 
made a big difference.
    Mr. Dorman. Well, we have just six minutes left. Like 
always, our time seems to disappear. So I am going to ask a 
couple of quick wrap-up questions and then give the last 
question to Pat Dyson to finish up the roundtable.
    Dan, you talked earlier about Chinese labor NGOs. You also 
mentioned a Chinese CSR NGO. Is there a CSR NGO in China?
    Mr. Viederman. I will speculate on that.
    Mr. Dorman. I do not mean to put you on the spot.
    Mr. Viederman. No. I was speculating that it is potentially 
a productive way to describe an NGO that might yet develop. A 
labor NGO that is also working on CSR issues, especially to the 
extent that they are engaged with international brands, might 
effectively define itself as a CSR organization.
    It may be semantic, but productively semantic, to change 
the terminology and talk about them as corporate social 
responsibility NGOs, because clearly corporate social 
responsibility is something that is well-accepted within a 
particular swath of Chinese society. But I did not have a 
specific organization in mind.
    Mr. Dorman. I did not mean to put you on the spot.
    Mr. Viederman. No, no. I think is an area for exploitation 
by Chinese NGOs.
    Mr. Dorman. Dr. Rosenbaum, during your testimony you 
mentioned that you do not see a child labor problem in the 
export sector.
    Ms. Rosenbaum. Did I say that?
    Mr. Viederman. I think I may have said that.
    Ms. Rosenbaum. Yes.
    Mr. Dorman. This is an issue that our Commissioners have 
focused on. But you did bring up that you do see juvenile labor 
in the export sector. Are there Chinese laws and regulations 
that provide additional protection for juvenile workers?
    Mr. Viederman. Without reference to a document, I think 
that there is. The Chinese Labor Law does require that juvenile 
workers have special protections, including that they have to 
have regular medical examinations and that they are not allowed 
to work overtime. Juvenile workers have a more strict limit on 
the number of hours that they can work, for example. So, there 
is a difference. I would be happy to find out more information.
    Ms. Rosenbaum. I thought, also, that they are not allowed 
to work at night, to do night shifts.
    Mr. Viederman. Right.
    Mr. Dorman. So that is something to look at.
    Mr. Viederman. There is a distinction.
    Mr. Dorman. One final question. I think this came up in 
conversation a couple of times in the last hour and a half, and 
some additional comments would be useful. Can you tell us more 
about the programs that train factory managers on labor 
relations, and the formation of independent committees. Three 
factories were mentioned, out of a much larger number that do 
not participate. What, or who, initiated the programs at these 
factories? What accounts for the programs? Enlightened factory 
management? Brands helping local government? What distinguishes 
the factories that choose to take this road? Can you provide us 
additional insights?
    Ms. Rosenbaum. In terms of the project that we worked on, 
each of these 10 factories was invited to participate.
    Mr. Dorman. So you initiated it.
    Ms. Rosenbaum. That is right. Now, whether this will then 
spread in terms of, let us say, other factories being 
interested in doing something like this, at this point we do 
not know. We still have a number of months to go in the 
project. But I think there has to be a business case for CSR. I 
mean, we can make the labor case and we can make the 
environmental case and the occupational health and safety case 
for it, but I think that there has to be a business case for 
CSR also, that factories that are good at these things, that 
are willing to make the investment of time, energy, and effort, 
are somehow going to see that this affects their business in a 
positive way. If we are able to do that, I would suspect that 
we will see factories that are going to do it.
    At the same time, and I would say this comes from 
background in other countries more than in China, I think there 
are some factories whose management are never going to get it. 
I just think that is the nature of the beast, that there are 
some people who are slow learners on some of these topics. So I 
do not think there is going to be like a magic tipping point 
and all of a sudden everybody is going to get it.
    Just the fact that we are hearing factories say, ``We want 
to be a COC company, we want to be known that way, we want to 
be in compliance so that when you come in you do not find us 
with a set of problems that you have to tell us how to fix, but 
that we have already addressed these things.'' This, for me, is 
progress. I do not know if that really addresses it.
    Ms. Gearhart. We have seen factories be more interested and 
more willing based on long-term relationship and trust with a 
given brand.
    Ms. Rosenbaum. Yes.
    Ms. Gearhart. However, I would say that that needs to be 
combined with individual factory managers, and preferably the 
owners, having the will. In some factories you will find those 
individual managers who have enough autonomy, enough trust from 
the factory owner to move forward, and they are thinking 
innovatively. It does still come down to individuals at that 
    Mr. Dorman. Last question to Pat Dyson.
    Ms. Dyson. Thank you. Dan, I think that you looked into the 
wage issue in a number of factories. There is some thought that 
if wages improve in China, and living conditions and benefits, 
that companies will then flee to other parts of Asia that are 
cheaper. So, in other words, improvement is not going to help 
the Chinese workers in the end. Do you think that is a fair 
point? I see you smiling. Do you have an opinion on that?
    Ms. Rosenbaum. That is the excuse.
    Mr. Viederman. I guess there are a couple of ways to look 
at that question, one of which is that the brands that are 
currently sourcing in China and the factories that are 
currently operating there with Chinese management do face a 
legal and an ethical obligation, be it articulated in the code 
of conduct or otherwise, to operate in accordance with that 
code or with local law. So whether or not there is an argument 
to be made that, economically, good labor practices would force 
Chinese workplaces to close and people would go source in Burma 
or Bangladesh, in a sense avoids the question of what do you do 
while you are still there.
    So I do not find it a particularly productive question to 
ask at this point. There is so much that can be done in the 
short-term, and needs to be done, just to bring labor standards 
up to where they ought to be based on existing commitments. 
Beyond that--I cannot speak for brands--it certainly seems to 
me that they are sourcing, and have decided where to source, 
for a variety of different reasons, not simply on the basis of 
the strictest identification of the lowest wage country. So, I 
would be surprised if you would see a mass exodus from China if 
working conditions were improved.
    Ms. Rosenbaum. Pat, I get asked that all the time. It does 
not matter whether we are talking about China, whether you are 
talking about Central America, or Africa. It does not make any 
    There is this other piece that says--and I say this to 
brands all the time--if you want to expand your markets, more 
people have to be able to afford your products. So at some 
point, those two points have to coincide. We will run out of 
places on the face of earth to run for cheap labor, and at some 
point we will have to deal with all of this. But we hear that 
in country after country when you raise the wage issue.
    But there is an ethical and a moral thing that is involved 
here, and it is what should any worker who works for a 40-hour 
or a 48-hour work week be able to do as a result of that work? 
I would say the same thing to people who are employing people 
here in the United States. What do workers have the right to 
expect in return for the labor that they give, good, honest 
work? There should be a decent standard of living and the 
ability to care for yourself and for your family. That should 
go without saying. You can call it a family value. I am sorry, 
I am being fresh. I apologize. No, I do not. [Laughter.] I 
think I did that the last time I was before the Commission 
    Ms. Dyson. We will still ask you back.
    Ms. Rosenbaum. Sure.
    Mr. Dorman. Well, as you all know, the Commission mandate 
calls on us to look at rule of law and human rights development 
in China. This is a broad mandate, and our Commissioners are 
attuned to the entire range of issues in this mandate. But 
there is a smaller set of issues that generate a particular 
level of interest by our Commissioners, and this is one of 
them. Especially because of this, I would like to thank each of 
you for sharing your wisdom, your insights, and your knowledge 
on this issue. I found this to be a very interesting and useful 
conversation, so I hope you will come back and join us in the 
    Ms. Rosenbaum. Thank you for having us.
    Mr. Viederman. Thank you.
    Ms. Gearhart. Thank you.
    Mr. Dorman. With that, we will call the roundtable to a 
conclusion. Thank you.
    [Whereupon, at 4:05 p.m. the hearing was concluded.]